Malta Hotels and Restaurants Association

Malta's tourist numbers up

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Jun 24, 2011

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The Malta Hotels and Restaurants Association (MHRA) yesterday reported that the performance of Malta’s hotel industry during the first quarter of this year registered positive growth but operating costs exceeded revenue gains in the three- and four-star categories.

MHRA President, George Micallef, yesterday lauded MTA’s efforts for the results achieved in the fist quarter, saying that “the sustained increase in tourist arrivals to our islands in the first quarter of 2011 is indeed a positive and encouraging trend for all operators in the hospitality sector, and was a major contributory factor to the occupancy and rate improvements being registered across all hotel categories, albeit far more contained in the three- and four-star categories”.

“However, costs have continued to spiral upwards and in absolute terms have exceeded the revenue gains in both the three- and four-star categories which resulted in higher ‘winter’ losses, while only the five-star hotels managed to reduce their first quarter losses.

“One main concern is the fact that the ‘cost pressures’ seem to be coming from all angles, with sharp increases being reported in cost of food sales, direct operating costs, administration costs, marketing costs, property expenses and utility costs and a higher rate of VAT,” Mr Micallef added.

“This negative phenomenon of ‘spiralling’ costs must be addressed as a matter of urgency, as it is eating viciously into hard earned revenue gains of most hotels and is actually leaving a large number of operators worse off than previous years. Despite the improvements registered, results show that for the first three months of this year the gross operating loss is estimated to be around €6m, compared to around €7m in 2010. If we were to add on the financing and depreciation costs, the losses will increase substantially.”

The MHRA reported a continuing trend of a shorter average stay. In fact despite the impressive increase in arrivals of 24%, spent nights in collective accommodation (hotels) only went up by 13%. What is also of concern to MHRA is the national per capita spent, which declined by 6% for the first three months of the year.

Although revenue prospects continue to be encouraging, the MHRA believes that in 2011, “cost containment” is going to be a crucial determining factor, as was the case in 2010. The MHRA reported that the current booking situation has been good but not as good as most expected it to be, with certain hotel categories securing occupancies at the expense of rate discounting.

The MHRA President reiterated the Association’s concerns about the national carrier, Air Malta, saying that “we understand that the Air Malta process is a delicate one, and that we are now at a very important juncture, but the clock is ticking and has been ticking for a while now, and it is imperative that negotiations with the European Commission are concluded soonest”.

“Winter operations are around the corner, and we need to determine the seat capacity and routes schedules soonest in order that we can start selling them. The Malta Tourism Authority needs to be better informed and kept abreast of developments, not just because of its marketing role but also because it would be expected to find ways of fillings gaps, and there needs to be enough lead time to plan things,” he said.

Mr Micallef also drew attention to the many “unknowns” which are creating a lot of anxiety, not just for the Air Malta’s employees, but also for the tourism industry’s employees and the many businesses and stakeholders that depend on the existence of Air Malta.

Talking about the prospects for next winter Mr Micallef said that “these results underline why the industry struggles to cope with the winter months even with the existing seat capacity. If we were to experience any significant cutbacks on seat capacity for next winter, this will only mean that a number of hotels will have no choice but to close for the winter months, and if this were to take place, this will be not be good to anyone, including the hotel industry itself!”

He added that “the challenge is that we work towards securing Air Malta’s future in the shortest possible time, without holding back on opportunities that come our way in the process. MHRA calls for a unified and sensible approach in tackling these sensitive challenges while pledging its support”.